In other words, the answer is also temporal; it depends on the time horizon. Are we looking at the exchange rate changes over the short term, such as the last three months, or the very long-term trend over decades? Arguably, different key factors affect exchange rates over the short term (minutes to a few months), medium term (a year to a few years) and the long term (up to decades).
We are asked this question everywhere we go — not because we claim to know the answers, but because it is on everyone’s mind, from office workers to corporate chiefs, investors, bankers, economists and fund managers.
The answers so far, at least those that are publicly articulated, are external factors such as the US Federal Reserve cutting interest rates (thereby making the spread on ringgit bonds more attractive), improving macroeconomics in the country and greater political stability and more positive fiscal balances. They are not wrong, but they appear simplistic. It also does not answer the question of whether this trend of a stronger ringgit will be sustainable.
